KUALA LUMPUR (Feb 14): Sunway Real Estate Investment Trust (REIT) announced a lower distribution of 2.28 sen per unit in the second quarter ended Dec 31, 2016 (2QFY17), down 11.3% from the 2.57 sen per unit it posted in 2QFY16, primarily due to cessation of manager's fee payable in units, effective financial year 2017.
"On an annualized basis, this translated into a distribution yield of 5.3% based on the market closing price of RM1.72 as at Dec 31, 2016," the property investment company said in a media release this evening.
Sunway REIT's lower distribution was in tandem with a lower net property income for the quarter, which came in 3.1% lower at RM94.06 million versus RM97.05 million a year ago, with net realised income sliding 8.8% to RM67.13 million from RM73.58 million previously.
Net profit declined 0.5% to RM71.14 million from RM71.52 million a year ago, as revenue declined 3.8% to RM126.88 million from RM131.87 million.
The lower quarterly income was because its hotel segment — Sunway Resort Hotel & Spa — was affected by subdued corporate and leisure demand, though its retail segment's income improved 1.4% year-on-year (y-o-y) to RM98.8 million, supported by the commencement of major rental reversion cycle on its two flagship malls: Sunway Pyramid Shopping Mall and Sunway Carnival Shopping Mall; office segment income also grew 5.2% y-o-y to RM7.9 million.
For the first half ended Dec 31, 2016 (1HFY17), Sunway REIT's distribution per unit (DPU) came in at 4.55 sen, down 3% from the 4.69 sen it gave out last year, while net realised income slid 0.2% to RM133.86 million from RM134.14 million.
Net profit for the period eased 0.6% to RM135.29 million from RM136.03 million in 1HFY16, though revenue gained 1.1% y-o-y to RM255.76 million from RM253.08 million, with net property income up 1.7% at RM190.12 million versus RM187 million previously.
Sunway REIT blamed the lower earnings to the closure of Sunway Pyramid Hotel since April 2016 as it undertook an accelerated refurbishment, which caused its hotel earnings to contract by 26.4%.
Its office segment also posted low average occupancy rate at its Sunway Tower, due to massive oversupply in the sector.
Going forward, Sunway REIT's manager — Sunway REIT Management Sdn Bhd — expects the business environment to remain tough.
"We continue to balance future growth in distribution income through active asset enhancement initiatives (AEIs) and acquisitions," said Sunway REIT Management chief executive officer Datuk Jeffrey Ng, adding that major AEIs will include the proposed expansion of Sunway Carnival Shopping Mall in the mainland of Penang.
Sunway REIT also noted that its property value will increase 1.4% to RM6.52 billion, from RM6.43 billion recorded as at June 30, 2016, on completion of its proposed acquisition of an industrial property in Section 23, Shah Alam.
"The key consideration for the 'Other' segment emphasises on quality tenants and long-term leases to generate long-term stable income to the assets portfolio. In view of the higher DPU accretiveness of such assets, we will continue to be on the lookout for such assets under 'Others' category," Ng said.
He further added, "In addition, Sunway Pyramid Hotel is expected to contribute positively upon the full completion of the refurbishment. The hotel has progressively re-opened for business since December 2016, with expected full re-opening in 4QFY17."
Sunway REIT's units closed unchanged at RM1.77 today, giving it a market capitalisation of RM5.18 billion.
Currently, Sunway REIT's portfolio comprises 14 assets: four retail malls, five hotels, four office buildings and one medical centre.